A report from Cushing Oklahoma showed slow growth in oil demand while the glut of oil supply remained high. The EIA (Energy Information Assoc.) reported that crude supply decreased but that Cushing showed a large build up at the same time. This created a bearish tone in trading and oil stocks declined along with the price of oil in open trading. Also noted was a small increase in the demand for gasoline which spooked traders.

Phil Flynn from Price Futures wanted to see demand for gasoline increase more with the price under 2 dollars at most pumps in the US. US crude fell $1.28 at the mid-point in the day. The price had strengthened in anticipation of a report showing a lot of new demand. But when the report did not show that, prices fell rapidly.

US production and OPEC’s lack of supply cuts has allowed oil prices to fall nearly 50% over the past six months. Supply is expected to be high next year also in comparison to the demand that is being seen. The Obama administration has taken the step of allowing crude to be exported for the first time in 4 decades, but it has not been enough to firm up pricing in the US.

Warren Mosler on oil and the US economy